Geopolitical shocks expose governance gaps in Bangladesh’s energy sector

Global energy shocks do not always create vulnerabilities for countries, but they expose the ones that already exist. The latest Middle East escalation is doing exactly that for Bangladesh’s energy system, revealing how closely the country’s economic stability is now tied to developments far beyond its own borders.

For decades, Bangladesh has relied primarily on domestic natural gas to power its economy. Fields such as Bibiyana, Habiganj, and Titas supported electricity generation and industrial expansion. But by the early 2010s, demand rose faster than domestic supply, forcing policymakers to confront an uncomfortable reality: the reserves that had sustained the system would not last indefinitely.

Bangladesh began to look outwards. Infrastructure was developed to import LNG, linking the national grid to international energy markets. Floating storage and regasification units were installed off the coast so that LNG cargoes arriving by tankers could be converted back into gas and injected into the national grid. The first of these terminals began operating in 2018, marking a significant shift in the architecture of the country’s energy system.

Said system now stretches far beyond its own geography, from gas fields in Sylhet to LNG tankers crossing the Strait of Hormuz. With that shift has come a new form of exposure. Much of the country’s imported LNG is tied to volatile global spot markets, where geopolitical disruptions push prices sharply upwards within weeks.

The transition helped avert an immediate crisis. Yet, the shift altered the system’s risk profile. Over the past decade, Bangladesh has moved from a system largely reliant on domestic resource security to one increasingly exposed to global fuel markets. The decision was difficult to avoid. Gas discoveries slowed and exploration investment lagged—partly reflecting regulatory constraints and pricing structures that discouraged heavier investment—while electricity demand rose rapidly alongside industrial expansion. Policymakers faced a stark choice: constrain growth through shortages or connect the system to global fuel markets through LNG imports.

Imported fuel now plays a central role in meeting the country’s energy needs. It relies heavily on imported oil and coal, while LNG imports—approaching 70 lakh tonnes annually—supply power plants across the economy. A significant share of these cargoes is purchased on the spot market—roughly 29 percent of Tk 55,000 crore allocated for LNG imports in the current fiscal year—leaving the system widely exposed to sudden price movements.

More broadly, Bangladesh now relies on imports for around 95 percent of its primary energy inputs. In such systems, volatility in the global market can quickly spill over into forex reserve pressures, fiscal constraints, and domestic energy pricing.

The effects of these disruptions are not always visible in energy statistics. During the recent fuel rationing imposed on the refilling stations on March 6, which was withdrawn on March 15, long queues formed outside the stations in Dhaka and elsewhere as people waited hours for limited allocations. For households and businesses alike, these scenes illustrate that energy shocks are not distant geopolitical events but real social and economic disruptions that ripple through everyday life. Energy shocks quickly spill into transport costs, food prices and industrial production. For an economy already grappling with inflation of over nine percent, energy security is not only about keeping power plants running, but also about protecting economic stability.

Many countries face similar challenges. The difference lies in how energy systems are designed to absorb shocks. After the oil crises of the 1970s, Japan developed large strategic petroleum reserves to cushion supply disruptions. India has constructed underground storage caverns for similar purposes. Bangladesh, by contrast, typically holds only a few weeks of fuel stocks and relies heavily on continuous LNG deliveries. Unlike crude oil, LNG is difficult and costly to store in large quantities, leaving the system with limited room to manoeuvre when markets tighten. Countries manage this vulnerability through diversified supply contracts and flexible import infrastructure rather than large fuel stockpiles.

Energy security is ultimately defined by the buffers that prevent global market turbulence from spilling directly into domestic disruption. The safeguard principle is familiar in corporate risk management: business continuity planning. Organisations that operate across volatile markets do not assume stability; they build redundancy into critical systems so that disruptions in one part of the network do not halt operations entirely.

National energy systems require a similar discipline. When imports become central to a country’s energy system, resilience depends not only on expanding supply but also on the institutional capacity to anticipate and mitigate risks.

Bangladesh has begun exploring ways to diversify its energy mix, gradually expanding renewable capacity while pursuing nuclear generation as an additional source of baseload power. These shifts reflect a longer-term effort to reduce reliance on imported fuels and align with global energy transition trends. However, managing that transition while maintaining affordable and reliable supply presents its own set of challenges for policymakers.

Diversifying the energy mix, for instance, will require more than vision statements and setting new targets. Expanding renewable power depends on building the right conditions for investment—clear policies, reliable regulatory framework, adequate incentives, and sustained structured financing that can support projects over the long term. Private companies will ultimately play a major role in that transition, and it is important that they are given the right ecosystem to attract that investment. Without those foundations, the new government’s pledge to raise the country’s renewable energy capacity from its current five percent to 20 percent by 2030 will remain an unrealised aspiration.

The energy sector is not without planning frameworks, though. The Integrated Energy and Power Master Plan (IEPMP) adopted in 2023 outlines a long-term roadmap for the sector through 2050, while earlier initiatives such as the Renewable Energy Policy and the Energy Security Fund were intended to strengthen domestic capacity and fuel supply stability. Even so, much of the current strategy continues to rely heavily on imported fuels to meet rising demand. In practice, policy has focused more on expanding supply than on building resilience against external shocks.

For Bangladesh, the latest tensions in the Middle East highlight how intricately national energy systems—and domestic economic stability—are now intertwined with global political developments. Eventually this crisis will subside, energy prices will stabilise, and shipping routes will return to normal. But the structural capability gaps it has revealed will remain. Can Bangladesh’s energy system absorb the next crisis? Strengthening strategic reserves, diversifying supply contracts, broadening the energy mix, and developing a robust energy continuity framework will determine whether future shocks will be manageable.

Tasneem Tayeb is a columnist for The Daily Star. Her X handle is @tasneem_tayeb.